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2016 (11) TMI 202 - AT - Income TaxTransfer pricing adjustment - MAM - TNMM - comparability - Held that:- It is an admitted fact that the assessee entered into international transaction with Moriseiki, Japan and to determine the arm’s length price, the assessee adopted TNMM method as most appropriate method in accordance with OECD Guidelines, and the operating profit/operating cost was considered as profit level indicator. The AO was of the view that the assessee ought to have earned gross profit rate of 38.09% on the direct sales made by the HO in India and 50% of that gross profit was attributable to the assessee. In the present case, it is an admitted fact that in the subsequent year, the DRP considered the TNMM as the most appropriate method and worked out the arithmetic mean margin at 5.60% on the basis of 5 comparables while the assessee had calculated the average margin on the basis of 13 comparables at 5.84% and since the facts in the year under consideration are similar to the facts involved in the subsequent year as there was no change in the functions, utilization of assets and risk profile of the assessee. Therefore, the ld. CIT(A) rightly held that the action of the AO was not sustainable because he on the one hand had accepted TNMM and also used profit split method for attribution of profit on the international transaction at 50:50 ratio. In our opinion either of the two methods could have been used and not both, therefore, the ld. CIT(A) was fully justified in holding that the action of the AO was not sustainable in the eyes of law. In the present case, when the AO himself accepted that the transaction was benchmarked under the provision of Section 92 of the Act, so there was no need to attribute the profit separately to the assessee PE. Since, there is no change in the facts for the year under consideration vis-ŕ-vis subsequent year, the ld. CIT(A) rightly restricted the adjustment to the international transaction at ₹ 54,37,717/-. We do not see any infirmity in the impugned order passed by the ld. CIT(A). - Decided against revenue
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